Afghan president signs terror law needed to avoid blacklist

KABUL (Reuters) - Afghan President Hamid Karzai signed a law aimed at curbing the financing of terrorist groups, a government statement said on Thursday, the second of two measures needed to save its banks from being put on an international blacklist.

"After the judiciary verified that this law does not violate our national sovereignty and human rights, he (the president) ratified it," the statement said.

Together with the anti-money laundering law that was signed last week, the legislation will help persuade the international financial watchdog that the Afghan government is serious about combating financial crimes.

Many banks have already stopped dealing with Afghanistan because of weak regulation, making it difficult for businesses to pay for imports or families to send money to children studying abroad.

In May, many Afghan banks and importers were dealt a blow when their Chinese counterparts halted to dollar transactions.

The international watchdog, the Financial Action Task Force (FATF), warned Afghanistan in February that its banks would be blacklisted at its next meeting in June unless it showed a more serious commitment to clamping down on financial crime.

Despite a last-ditch effort by the central bank and others to push the laws through, only the money law was signed by the deadline, but that turned out to be enough to avoid the blacklist at least until FATF meets in October.

Although both laws have now passed, Afghanistan will still have to prove that they are being adequately enforced to remove the threat of the blacklist.